The 0.2 percent decrease in purchases followed a 0.8
percent gain, Commerce Department figures showed in Washington.
Adjusted for inflation, the decline was 0.3 percent, the biggest
in more than three years. Incomes were little changed last month
as the biggest Atlantic storm to ever hit the U.S. shaved $18.2
billion in wages at an annual rate.

“The outlook for consumer spending is tenuous,” said
Jacob Oubina, a senior economist at RBC Capital Markets LLC in
New York. “We’re already on soft footing and you’re now in an
environment where the risks to confidence are increasing because
of the fiscal cliff.”

The possibility that lawmakers will not find common ground
to prevent about $607 billion in tax increases and government
spending cuts from taking effect next year raises the risk that
gains in consumer confidence will be reversed as the December
deadline nears. Combined with revisions yesterday showing
household spending decelerated last quarter, today’s data help
explain why the Federal Reserve has geared its policy toward
stoking job growth.

Also today, the MNI Chicago Report’s business barometer
rose to 50.4 in November from 49.9 a month earlier. A reading of
50 marks the dividing line between expansion and contraction.
The group’s measure of orders dropped to the lowest level since
the expansion began in June 2009.

Stocks closed higher, erasing losses in the final 15
minutes of trading, as investors bought shares before changes to
MSCI Inc. indexes. The Standard & Poor’s 500 Index climbed less
than 0.1 percent to 1,416.18 at the close in New York.

Household purchases climbed at a 1.4 percent annual rate in
the third quarter, the smallest gain in more than a year and
down from a previously reported 2 percent advance, Commerce
Department data showed yesterday. Spending increased at a 1.5
percent pace in the second quarter.

Wages and salaries fell 0.2 percent in October as Sandy
interrupted work schedules, after a 0.3 percent gain a month
earlier.

Inflation-adjusted spending on durable goods, including
automobiles, decreased 1.7 percent in October after a 2.2
percent gain. Outlays for non-durable goods, which include
gasoline, fell 0.3 percent last month.

Store Closings

Sandy closed as many as 230 stores owned by Brown Shoe Co.,
according to Diane Sullivan, the St. Louis-based company’s
president and chief executive officer. While all but four
locations re-opened within nine days, the operator of the Famous
Footwear chain expects fourth-quarter sales were cut by about
$2.5 million, Sullivan said during a Nov. 20 earnings call.

The storm affected 106 Urban Outfitters Inc. stores and
curtailed online shopping, reducing fiscal third-quarter revenue
by about 1 percentage point, according to Chief Financial
Officer Frank Conforti. The impact will be smaller in the
current quarter, he said on a Nov. 19 call with analysts.

Companies are also dealing with weaker global demand,
helping explain the limited improvement in the MNI Chicago
Report’s business barometer after a reading of 49.9 in October.
The gauge of new orders fell to 45.3, the weakest reading since
June 2009, from 50.6 in October. Measures of employment and
production picked up.

Europe’s Economy

“We have Europe in a recession and we’re not quite sure
when that all turns around,” Moorthy said at a Nov. 28
conference. “We have some of the growing economies China, India
that all have their own issues as well,” he said. “So we were
not ready and we are not ready to call a bottom.”

Germany, Europe’s largest economy, will be tipped into a
recession as the sovereign debt crisis roiling its neighbors
extends into 2013, according to the Bloomberg Global Poll.

With the world economy cooling and American lawmakers
struggling to avert the fiscal cliff, Fed officials are keeping
policy accommodative.

“Although the economy continues to expand, we must grow
faster if we are to put all of our jobless workers and idle
businesses back to work,” William Dudley, president of the
Federal Reserve Bank of New York, said yesterday.